Royal Mail's Moya Greene, who earned £1.2m last year, was the worst-paid chief executive in the FTSE100, according to chairman Donald Brydon.
Photograph: Royal Mail Group

Royal Mail has scrapped plans to increase its chief executive, Moya Greene's pay, after business secretary Vince Cable put pressure on the board over the proposed rise.

The recently privatised postal group said it would freeze Greene's pay this year at her request. The decision reverses plans for an increase that Royal Mail's chairman had claimed was needed to make sure Greene stayed with the company.

Donald Brydon said this year that Greene, who earned £1.2m last year, was the worst-paid chief executive in the FTSE100 and that a pay rise was "a necessary part of making sure we keep her".

Cable welcomed the move. "I admire the restraint the Royal Mail board has shown. I appreciate the continuing good work of Moya Greene, their CEO in transforming the business," he said.

Cable had written to the heads of pay committees at FTSE100 companies last month telling them restraint on bosses' pay was vital to maintain public trust. The government has clamped down on pay at other companies where it has a significant shareholding, including the 81% state-owned Royal Bank of Scotland which abandoned plans to award bonuses worth 200% of salary and Network Rail, which has cut executive bonuses from 160% of annual pay to 20%.

Royal Mail said: "The remuneration committee of Royal Mail Group has decided not to propose any base pay increase or new incentive arrangements for the chief executive officer. In doing so, the committee has taken into account the views and wishes of the CEO."

Cable has clashed with Greene in the past over her pay. After the business secretary objected to a £250,000 payment towards the cost of buying a house in the UK, the 59-year old Canadian repaid the money.

Sources close to Royal Mail tried to play down Cable's influence on Greene's decision, saying she requested the freeze before a pay proposal was put to shareholders, including the government.

In an email to a member of the public, she said she was "deeply offended" by criticism over her pay, adding: "I took on a company in grave difficulty. I was here for a full 15 months before officials and/or ministers deigned to explain the exact basis upon which I would be paid. I had long resigned my previous position."

Greene has not had a pay rise since she joined Royal Mail from Canada Post and was expecting an increase after the company entered the private sector with last year's flotation. She earns less than her predecessor, Adam Crozier, who was paid £2.4m in his final year including a £633,000 salary against Greene's £498,000 – which rose to £1.2m after a bonus of £399,000 was included along with benefits and pension contributions.

Dave Ward, CWU deputy general secretary, said: "We welcome Royal Mail's decision to freeze the salary of the chief executive. The UK has one of the highest pay gaps in its private sector companies in the world and any steps towards addressing these inequalities instead of making them worse are welcome.

"Companies such as Royal Mail should be mindful of the gulf between the pay of senior staff and the lowest-paid employees, particularly as those on the lowest incomes are financially squeezed because of the increase in the cost of living."

Cable has faced severe criticism over his handling of the privatisation after Royal Mail shares surged 38% on their first day of trading and continued to rise. The company's market value is more than £2bn higher than the £3.3bn valuation when the shares floated.

At Parliament's business select committee last week Cable denied underpricing the sale and defended the decision to give priority status to 16 investors, some of which sold their shares soon after the flotation.

Remuneration revolt

ITV has been warned by one of its top shareholders that it will face a revolt over plans that could increase executive bonuses over next three years.

A vote against the remuneration policy is significant as it is binding vote while the vote on the remuneration report – covering last year's pay – sends a clear message about investors' views on pay deals but is advisory.

"The maximum limits under the remuneration plan have increased significantly and are too high in our view. The increases were also coupled with increases in the pension supplements and base salaries, which will have a ratcheting effect on overall pay levels in future years," said Ashley Hamilton, corporate governance manager at RLAM.

ITV is planning to increase Crozier's annual bonus potential to 200% of his £841,000 salary and his long-term incentive plan to 350% of his salary, from 180% and 225% currently.

Hamilton said last year's pay deal for Crozier would be supported. "Mr Crozier has done an excellent job at turning around a struggling business. Our clients have benefitted through a tripling of the share price and a change in the strategy which we hope will deliver more stable and sustainable returns," Hamilton said. ITV declined to comment. Jill Treanor